Enhanced Index Tracking is the problem of selecting a portfolio that should generate excess return with respect to a benchmark index. Here we propose a large-size linear optimization model for Enhanced Index Tracking that selects an optimal portfolio according to a new stochastic dominance...

The relative efficiency of financial markets can be evaluated using algorithmic complexity theory. Using this approach we detect decreases in efficiency rates of the major stocks listed on the Sao Paulo Stock Exchange in the aftermath of the 2008 financial crisis.

We propose a linear bi-objective optimization approach to the problem of finding a portfolio that maximizes average excess return with respect to a benchmark index while minimizing underperformance over a learning period. We establish some theoretical results linking classical No Arbitrage...

This paper shows that pricing catastrophe bonds boils down to computing first-passage time distributions of jump-diffusion processes. It derives a generic valuation expression by assuming that the jump risk is not systematic and then performs simulations, which can stress the sensitivity of...

Financial economists usually assess market efficiency in absolute terms. This is a shortcoming. One way of dealing with the relative efficiency of markets is to resort to the efficiency interpretation provided by algorithmic complexity theory. This paper employs such an approach in order to rank...

Financial economists usually assess market efficiency in absolute terms. This is a shortcoming. One way of dealing with the relative efficiency of markets is to resort to the efficiency interpretation provided by algorithmic complexity theory. This paper employs such an approach in order to rank...

This paper shows that pricing catastrophe bonds boils down to computing first-passage time distributions of jump-diffusion processes. It derives a generic valuation expression by assuming that the jump risk is not systematic and then performs simulations, which can stress the sensitivity of...

We show that a two-harmonic log-periodic formula fits the high-frequency data from the Dow Jones Industrial Average index, which encompass the recent episode known as the “flash crash†of May 6, 2010.

This paper investigates the performances of GMM estimates using kernel methods with and without prewhitening and the VARHAC method in a representative agent exchange economy. A Monte Carlo study is conducted to evaluate the issues of estimating the spectral density functions, e.g., parametric...

This paper investigates the performances of GMM estimates using kernel methods with and without prewhitening and the VARHAC method in a representative agent exchange economy. A Monte Carlo study is conducted to evaluate the issues of estimating the spectral density functions, e.g., parametric...